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Exar Reports First Quarter Fiscal Year 2013 Financial Results

Wednesday, July 25, 2012

Results In Line With Expectations

Fremont, California, July 25, 2012 - Exar Corporation (Nasdaq: EXAR), a leading supplier of analog mixed-signal and data management products, today reported financial results for the first quarter of fiscal year 2013 ended July 1, 2012. The Company reported revenue of $29.3 million for the first quarter and diluted earnings per share on a non-GAAP basis of $0.03.

"Our financial results for the first quarter were within expectations. Revenue growth was 5% and our earnings per share of $0.03 on a non-GAAP basis improved by $0.13 compared to the prior quarter. On a non-GAAP basis our gross margin was 47.2%, which represents a 720 basis point improvement over the prior quarter, which was negatively impacted by excess inventory. Our non-GAAP operating expenses were $12.9 million, down from $16.5 million in the prior quarter," commented company president and CEO Louis DiNardo.

"During the first quarter we benefited from our participation in the Big Data market where our data compression and security products are used in data warehousing, data analytics and cloud computing to improve system performance and reduce cost. Additionally, we saw growth in Communications product revenue and stability in our Connectivity business," added Mr. DiNardo.

"Our bookings were strong throughout the first quarter and increased 22% as compared to the prior quarter. While this level of bookings supported a book-to-bill ratio of significantly better than 1:1, our dependence on distribution sell-through, for which we have less visibility, and weak macro economic conditions suggest caution in the September quarter," concluded Mr. DiNardo.

For the second quarter of fiscal year 2013, the Company expects sales growth in the range of 2% to 4% and non-GAAP gross margin to be in the range of 47% to 49%. Diluted earnings per share on a non-GAAP basis are expected to be in the range of $0.03 to $0.05.

The following non-GAAP financial information excludes stock-based compensation, amortization of acquired intangible assets, restructuring and exit charges, provision for dispute resolution, and related tax effects. See "Generally Accepted Accounting Principles" below for further description.

                    NON-GAAP FINANCIAL COMPARISON
               (In millions, except per share amounts)
                              (Unaudited)

                                  THREE MONTHS ENDED
                              JULY 1,   APRIL 1,   JULY 3,
                                2012   2012 (1)      2011
Net sales                      $29.3     $27.8      $37.0
Gross margin                    47.2%     40.0%      48.6%
Income (loss) from operations   $0.9     $(5.4)      $0.1
Net income (loss)               $1.4     $(4.6)      $0.7
Net income (loss) per share
  Basic                        $0.03    $(0.10)     $0.02
  Diluted                      $0.03       N/A      $0.02


                       GAAP FINANCIAL COMPARISON
               (In millions, except per share amounts)

                                  THREE MONTHS ENDED
                              JULY 1,   APRIL 1,   JULY 3,
                                2012   2012 (1)      2011
Net sales                      $29.3     $27.8      $37.0
Gross margin                    44.0%     32.4%      45.5%
Loss from operations           $(1.2)   $(21.5)     $(2.2)
Net loss                       $(0.6)   $(20.8)     $(1.4)
Net loss per share
  Basic and diluted           $(0.01)   $(0.46)    $(0.03)


(1) Includes a revision to stock-based compensation expense 
that decreases the GAAP net loss by $741 thousand.

Results Conference Call

The Company invites investors, financial analysts, and the general public to listen to its conference call discussing the Company's financial results for the first quarter of fiscal year 2013, today, Wednesday, July 25 at 1:30 p.m. PDT. To access the conference call, please dial 800-230-1059 after 1:20 p.m. PDT. In addition, a live webcast will be available on Exar's Investor Relations webpage.

To access the webcast, please go to the Company's Investor Relations Homepage at: http://www.exar.com/news/investornews.aspx. A recorded replay of the conference call will be available starting at 3:00 p.m. PDT the day of the call until 11:59 p.m. PDT on August 1, 2012. To access the replay, please dial 800-475-6701 and use conference ID number 254673.

About Exar

Exar Corporation designs, develops and markets high performance analog mixed-signal integrated circuits and advanced sub-system solutions for data communication, networking, storage, consumer and industrial applications. Exar's product portfolio includes power management and connectivity components, communications products, network security and storage optimization solutions. Exar has locations worldwide providing real-time customer support. For more information about Exar, visit http://www.exar.com.

Safe Harbor Statement

The Company's statements about its future financial or business performance, changes in gross margins, net sales and diluted earnings per share are forward-looking statements that involve risks and uncertainties. These risks and uncertainties include global financial volatility, economic recession, and industry and market conditions, such as vendor capacity, quality or throughput constraints; possible disruption in commercial activities; successful development, market acceptance and demand for the Company's products; accounting considerations; and the level of inventories maintained at the Company's OEMs and distributors, as well as the other risks detailed from time to time in the Company's SEC reports, including the Annual Report on Form 10-K for the year ended April 1, 2012.

Generally Accepted Accounting Principles

The Company reports its financial results in accordance with GAAP. Additionally, the Company supplements reported GAAP financials with non-GAAP measures which are included in related press releases and reports furnished to the SEC, copies of which are available at the Company's website: http://www.exar.com or the SEC's website at: http://www.sec.gov. For the periods presented, we are disclosing non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP net income (loss), and non-GAAP basic and diluted net income (loss) per share, which are adjusted to exclude from our GAAP results all stock-based compensation, amortization of acquired intangible assets, provision for dispute resolution, restructuring charges and exit costs, and income tax effects. These non-GAAP measures are presented in part to enhance the understanding of the Company's historical financial performance and comparability between reporting periods. The Company believes the non-GAAP presentation, when shown in conjunction with the corresponding GAAP measures, provide relevant and useful information to analysts, investors, management and other interested parties following the semiconductor industry. For its internal purposes, the Company uses the foregoing non-GAAP measures to evaluate performance across reporting periods, determine certain employee benefits as well as plan for and forecast the Company's future periods. These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.

# # #

Contact:
Kevin.Bauer@exar.com
510-668-7000

 

                 EXAR CORPORATION AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           (In thousands, except per share amounts)
                          (Unaudited)

                                      THREE MONTHS ENDED
                                  JULY 1,     APRIL 1,     JULY 3,
                                    2012      2012 (1)       2011

Net sales                        $19,447      $18,256     $25,073
Net sales, related party           9,804        9,533      11,905
     Total net sales              29,251       27,789      36,978

Cost of sales:
  Cost of sales                   10,870       11,711      13,337
  Cost of sales, related party     4,512        5,021       5,743
  Amortization of purchased
   intangible assets                 919          888         905
  Restructuring charges and
   exit costs                         81        1,160         152
     Total cost of sales          16,382       18,780      20,137
Gross profit                      12,869        9,009      16,841
Operating expenses:
  Research and development         5,449        8,017       9,280
  Selling, general and
   administrative                  7,782        9,774       9,542
  Restructuring charges and
   exit costs                        804       12,740         173
     Total operating expenses     14,035       30,531      18,995
Loss from operations              (1,166)     (21,522)      (2,154)

Other income and expense, net:
   Interest income and other, net    646          784         711
   Interest expense                  (34)         (34)        (60)
     Total other income and
      expense, net                   612          750         651

Loss before income taxes            (554)     (20,772)     (1,503)
Provision for (benefit from)
  income taxes                        22           48         (77)

Net loss                           $(576)    $(20,820)    $(1,426)
Loss per share:
  Basic and diluted loss
   per share                      $(0.01)      $(0.46)     $(0.03)

Shares used in the computation
 of loss per share:
  Basic and diluted               45,388       45,012      44,599

(1) The Company's prior period financial results have been revised
to reflect an immaterial correction. During the first quarter of 
fiscal 2013 the Company identified an error in its accounting for 
stock-based compensation in the fourth quarter of fiscal 2012. The 
Company has concluded that the error was not material to any of its
prior period financial statements and has revised its prior 
financial statements according to SEC guidance related to immaterial 
corrections. As a result of the revision, the net loss for the three 
months ended April 1, 2012 decreased by $741 thousand.



                 EXAR CORPORATION AND SUBSIDIARIES
               CONDENSED CONSOLIDATED BALANCE SHEETS
             (In thousands, except per share amounts)
                          (Unaudited)

                                       JULY 1,     APRIL 1,
                                         2012      2012 (1)

ASSETS

Current assets:
Cash and cash equivalents             $10,225       $8,714
Short-term marketable securities      184,888      187,668
Accounts receivable
 (net of allowances of $715 and
 $781, respectively)                   10,540        8,454
Accounts receivable,
 related party (net of allowances
 of $545 and $815, respectively)        4,091        2,918
Inventories                            16,238       18,374
Other current assets                    3,505        3,124
Total current assets                  229,487      229,252

Property, plant and equipment, net     25,975       27,793
Goodwill                                3,184        3,184
Intangible assets, net                  9,030        9,755
Other non-current assets                1,581        1,668

Total assets                         $269,257     $271,652

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities: 
Accounts payable                       $8,504       $7,823
Accrued compensation and related
 benefits                               3,645        3,918
Deferred income and allowances on
 sales to distributors                  3,063        3,410
Deferred income and allowances on
 sales to distributors, related party   9,634        9,608
Other current liabilities              10,045       13,615
     Total current liabilities         34,891       38,374

Long-term lease financing obligations   3,456        3,771
Other non-current obligations           6,267        6,215

Total liabilities                      44,614       48,360

Stockholders' equity                  224,643      223,292
Total liabilities and
 stockholders' equity                $269,257     $271,652

(1) Due to the correction of an immaterial error in the fourth 
quarter of fiscal of 2012, the balances at April 1, 2012 of 
Accumulated deficit decreased by $741 thousand and Additional 
paid-in capital decreased by $741 thousand. Total Stockholders’ 
equity remained the same.



                 EXAR CORPORATION AND SUBSIDIARIES
      SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS
              (In thousands, except per share amounts)
                          (Unaudited)

                                      THREE MONTHS ENDED
                                  JULY 1,     APRIL 1,     JULY 3,
                                    2012      2012 (1)       2011

Net Sales                        $29,251      $27,789     $36,978

 GAAP gross profit               $12,869       $9,009     $16,841
 GAAP gross margin                  44.0%        32.4%       45.5%
   Stock-based compensation          (15)          69          59
   Amortization of acquired
    intangible assets                880          888         905
   Restructuring charges
    and exit costs                    81        1,160         152
Non-GAAP gross profit            $13,815      $11,126     $17,957
Non-GAAP gross margin               47.2%        40.0%       48.6%

GAAP operating expenses          $14,035      $30,531     $18,995
   Stock-based compensation          189          287         825
   Amortization of acquired
    intangible assets                120          174         174
   Provision for dispute
    resolution                         -          820           -
   Restructuring charges
    and exit costs                   804       12,740         173
Non-GAAP operating expenses      $12,922      $16,510     $17,823
	
GAAP operating loss              $(1,166)    $(21,522)    $(2,154)
   Stock-based compensation          174          356         884
   Amortization of acquired
    intangible assets              1,000        1,062       1,079
   Provision for dispute
    resolution                         -          820           -
   Restructuring charges
    and exit costs                   885       13,900         325
Non-GAAP operating income (loss)    $893      $(5,384)       $134
	
GAAP net loss                      $(576)    $(20,820)    $(1,426)
   Stock-based compensation          174          356         884
   Amortization of acquired
    intangible assets              1,000        1,062       1,079
   Provision for dispute
    resolution                         -          820           -
   Restructuring charges
    and exit costs                   885       13,900         325
   Income tax effects                (39)          44        (142)
Non-GAAP net income (loss)        $1,444      $(4,638)       $720
	
GAAP net loss per share
  Basic and diluted               $(0.01)      $(0.46)     $(0.03)
	
Non-GAAP net income (loss) per share
  Basic                            $0.03       $(0.10)       $0.02
  Diluted                          $0.03          N/A        $0.02
	
(1) Includes a revision to stock-based compensation expense that
 decreases the GAAP net loss by $741 thousand.	



                 EXAR CORPORATION AND SUBSIDIARIES
                SUPPLEMENTAL NET SALES INFORMATION

                                      THREE MONTHS ENDED
                                  JULY 1,     APRIL 1,     JULY 3,
                                    2012         2012        2011

By Product Line
Communications                       10%           9%         18%
Datacom and storage                  12%           7%         11%
Connectivity                         55%          57%         51%
Power management                     23%          27%         20%

                                      THREE MONTHS ENDED
                                  JULY 1,     APRIL 1,     JULY 3,
                                    2012         2012        2011

By Geography
Americas                             22%          22%         25%
Asia                                 64%          61%         58%
EMEA                                 14%          17%         17%



                 EXAR CORPORATION AND SUBSIDIARIES
       SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE
                          (In millions)

         GUIDANCE FOR THE QUARTER ENDING SEPTEMBER 30, 2012
                            ADJUSTMENTS
                                          AMORTIZATION
                                           OF ACQUIRED
                                           STOCK-BASED    INTANGIBLE
                   NON-GAAP  COMPENSATION     ASSETS         GAAP
Net Sales          2% - 4%                                  2% - 4%
Gross Margin      47% - 49%     ~$0.1         ~$0.9        44% - 46%
                               million       million
Earnings (loss)
 per share      $0.03 - $0.05   ~$1.5         ~$1.0    ($0.02) - $0.00
                               million       million

Media Contact
Marketing Communications
  marcom[at]exar.com